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SB 661 would weaken California’s Made in USA label (2-year bill)

Update: On May 7th, SB 661 was held in the Senate Judiciary Committee and is now a 2-year bill.

The Consumer Federation of California opposes SB 661 (Hill), which would permit the false advertising and false labeling of products.

Specifically, the bill would allow a product to be offered for sale in California bearing a ‘Made in USA’ or ‘Made in America’ label if 90% of the cost of the product’s content is domestic and if the final transformation of the product occurred in the USA.

This would represent a substantial weakening of California’s “Made in USA” law, which requires products offered for sale in our state as “Made in America” or “Made in USA” to meet stringent domestic content requirements. California’s law has protected consumers from bogus claims that products are made in the USA when, in fact, they are partially made in the USA and include non-domestic content.

It would be false advertising to offer a product for sale with a ‘kosher’ label if 10% of the product is pork, or as ‘vegan’ if 10% of the product is meat or cheese, or as a particular year and vintage of wine if 10% of the content were grapes of another year and another region. We believe that it is equally false advertising to label a product as ‘Made in the USA’ if 10% of the product’s content or value is not American.

In a recent Gallup poll, 45% of Americans said they recently made a special effort to buy products made in the United States. When asked why, they mainly cited patriotic goals related to the economy, including creating and keeping jobs in the U.S., rather than product-specific considerations such as quality, safety, or cost. Sixty-four percent of Americans polled said they would be willing to pay more to buy a U.S.-made product than a similar product made in other countries.

How else will people know if something is actually made in the USA if they can’t trust labels?

In upholding California’s Made in USA law in 2011, the State Supreme Court [Kwikset v. Superior Court of Orange County (Benson)51 Cal.4th 310 (2011)] opined:

Simply stated: labels matter. The marketing industry is based on the premise that labels matter, that consumers will choose one product over another similar product based on its label and various tangible and intangible qualities they may come to associate with a particular source… In particular, to some consumers, the “Made in U.S.A.” label matters. A range of motivations may fuel this preference, from the desire to support domestic jobs, to beliefs about quality, to concerns about overseas environmental or labor conditions, to simple patriotism.’

The Kwikset Court pointed out that an economic loss to a consumer occurs if the consumer relied on the truthfulness of the label in deciding to purchase a product that he or she would not have purchased it had borne an accurate content label.

It should be pointed out that the federal labeling standard is weaker than California’s Made in USA standard. But California’s labeling law creates a level playing field for all domestic manufacturers, and creates no disadvantage to manufacturers located in our state. The law applies to every product ‘offered for sale’ in our state, regardless of the location where the product was manufactured.

A business manufacturing products in Nevada, Mississippi or another state that does not have a comparable labeling law, gains no labeling advantage over a California-based manufacturer, should that out-of-state manufacturer offer its products for sale in California. Similarly, a California manufacturer has no labeling disadvantage if it is manufacturing products that will be offered for sale only outside our state.

California’s labeling law applies to unqualified Made in USA claims. A qualified label should truthfully state if a product is “90% Made in the USA.”

SB 661 would undercut businesses that are committed to American manufacturing because their competitors would be immunized if they place a deceptive label on a product containing substantial imported content.

The bill would mislead California consumers who care about truthful labels to suffer an economic loss when they purchase a product that they would not have purchased if the label accurately stated the product’s origins.

SB 661 is scheduled to be heard in the Senate Judiciary Committee on May 7th.